Search

Chinese regulations wreaks havoc

Table of Contents

chinese

Regulators are heavily targeting private enterprises in China, and this crackdown shows in the stock prices for most, if not all, big Chinese businesses. As a result, hundreds of billions of dollars have been lost in the past 48 hours. 

Meituan, one of China’s biggest delivery apps, closed Tuesday, losing more than 17% in its stock price, eclipsing Monday’s tragic 14% decrease marking the worst 48 hours in the Company’s history. Another Chinese tech giant, Tencent, dropped 9%, recording its worst day in a decade or more. 

Meituan’s fall, which within a 48 hour time window cost the company $62 billion in market value, came as Chinese authorities issued new guidelines on Monday insisted on improved standards for delivery workers. 

China’s State Administration for Market Regulation stated that companies should ensure that riders make at least minimum wage, reduce the workload to an acceptable level, and make traffic safety education and training a priority.

But Meituan is just the tip of the iceberg. Problems in Chinese markets have also sent ripples through the world and sent two of the Asian giant’s biggest companies on a downward spiral: Alibaba and Tencent. Alibaba’s stock lost 6,4% each day on Monday and Tuesday; Meanwhile, Tencent has lost around one hundred billion dollars in market value on the same two trading sessions.

While its stock tumbled down, Tencent announced that its platform WeChat would not be accepting new registrations until early August while the company addresses compliance with new security and privacy regulations. 

Tencent was also affected by a regulatory order during the weekend to halt its plan to purchase a new music streaming service, China Music Corporation. The authorities cited competition concerns, saying that the tech giant is already the market leader. As a result, the company was forced to abandon the acquisition completely. 

Tencent stated on Saturday that it “fully accepted the decision” and would “strictly follow the regulatory requirements.” It also said it would “fulfill (their) social responsibilities and contribute to healthy competition in the market.”

Regulations and sanctions on China have worldwide effects

As new regulations come from the Chinese government and new sanctions and rules for Chinese companies come from the U.S Government, this issue has become a worldwide affair. On Tuesday, American markets, including the top U.S indices, were down, and analysts cite the situation of Chinese companies and market circumstances as a reason. 

Following Beijing’s regulatory decisions, there was a severe sell-off of Chinese stocks listed locally and abroad; According to Goldman Sachs, this caused a loss in market value for these companies of more than one trillion dollars. Analysts consider that Chinese stocks listed inside China or abroad are not a safe investment after this massive loss. In the mid-term, volatility will be the norm and may worsen the losses. 

Is China slowing down recovery? Will you buy Chinese stocks at a bargain? 

Learn more about world economic news and other current events on this week’s NewsFlight.

Ready to start investing?

Invest in stocks, ETFs, and complex products from US and global exchanges, all commission-free. Start with as little as €5!

Financial news and market insights

Recommended articles

Invest in what really matters to you

Whether it’s renewable energy or the latest IT giant,
invest in it with no commissions on FlexInvest.